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Jens Weidmann, President of the German Bundesbank and member of
the ECB Council, ventured into a veritable lion’s den with an
interview in Le Monde, the number one
liberal daily in France whose editorial bend has been supporting
President François Hollande and his “growth” policies.

And there, the central banker lashed out at Hollande and what
he'd promised during the campaign. And he lashed out at the ECB,
and at everything that smelled of a transfer union, and in
passing at Paul Krugman and others who wanted the ECB to
print with utter abandon to monetize the sovereign debt of
debt-sinner countries, even more so than it has already done.

Le Monde called him “guardian of monetary orthodoxy,”
whatever it meant by that because a central banker who insists on
maintaining price stability rather than printing trillions to
prop up the markets and enrich the bankers is closer in today’s
crazy times to a monetary novelty than monetary orthodoxy.

“Being in favor of growth is like being in favor of peace in the
world,” Weidmann said about the raging debate of growth vs.
austerity. “The real debate is which path leads to sustainable
growth,” he said. And the answer was clear: “structural reforms.”
Debt-fueled spending would just create an “economic straw fire.”
And then he added, “In fact, I’m asking myself what these
discussions are hiding.”

Then he shot down European Project Bonds that Hollande has been
pushing with all his might to fund infrastructure projects as
part of his “growth” policies. “This debate irritates me a bit,”
Weidmann said. “Every month, ingenious ideas to counteract the
crisis surge out of nowhere before they disappear a month later.
Now it’s project bonds.... It’s not a lack of infrastructure that
is slowing down growth in these countries.”

While he was at it, he whacked at Hollande’s most cherished
panacea for the debt crisis: “The belief that Eurobonds could
solve the current crisis is an illusion,” he said, reflecting the
opinion of his compatriots, an astounding 79% of whom were dead
set against them, grasping how insidious these bonds would be for
German taxpayers. Read.... Germany Walks Away From Greece.

Eurobonds, which would spread liability for one country’s
sovereign debt across all Eurozone countries, could only happen,
if at all, “after a long process that would among other things
have to include changing the constitution of several countries,
modifying treaties, and having more of a budgetary union,” he
said. “You don’t entrust someone with your credit card if you
cannot control how much he spends.”

Communalizing national debts across the Eurozone would require
“federalism,” he said. “But even in countries where governments
clamor for Eurobonds, such as France, I see neither public debate
on, nor popular support for the transfer of sovereignty that must
accompany them.”

Federalism. A toxic word in Europe where each country proudly
insists on its sovereignty. People are already complaining about
the incessant intrusions of the EU in their daily lives. So,
Le Monde asked, was there a way out of the euro crisis
without “jumping into federalism?”

Well, “I’m convinced that clarity on this subject would help us,”
he said. “Investors not only worry about the situation in one or
the other country, but also about the functioning of the Eurozone
as a whole.”

What about regaining the confidence not just of investors, Le
Monde asked, but also of populations?

“You have to find the equilibrium between economic necessities
and political limits,” he said. “Reforms in countries that
receive aid are necessary: they may be hard, but they permit the
country to pick itself up and not depend indefinitely on others."
And he warned of “a transfer union” where the debts of one
country would forever be paid by others. “Our role as central
banks is to guarantee price stability in the Eurozone. I’m
convinced that the future of the euro is fundamentally linked to
the support of the population, and that this support depends on
the confidence Europeans have in the stability of their money.”

He refused to say if he was bracing himself for Greece’s exit
from the Eurozone, but he left little doubt: “We will see if the
agreements underlying the solidarity of other countries are
respected. And if necessary, the aid should be stopped.” Then he
hammered home his point: “The decision is now up to the Greeks.”

Hollande would like for the ECB to support growth more
vigorously, Le Monde said—conveniently forgetting that,
after a series of devaluations since 1945, the French franc was
"revalued" in 1960 at 100 old francs to 1 new franc.
Confidence-inspiring notes were printed, and the dance started
all over again: from 1960 through 1999, when the franc was
replaced by the euro, it lost another 88% of its value—due to
France's habit of monetizing its debt. A fate Germany has tried
to avoid. And so, Le Monde asked Weidmann if he could
“envision an evolution of the ECB’s mandate.”

Um, no. “The mandate is deeply rooted and stems from the lessons
learned during the seventies and eighties," he said. "It’s when a
central bank ensures price stability that it contributes the most
to durable growth.”

He lamented that the balance sheet of the ECB has more than
doubled since the financial crisis and was larded with risks “to
avoid a collapse of the system.” But these were “risks for
taxpayers, particularly in France and Germany.” He worried about
overstepping “the red line between monetary policy and budgetary
policy” and said, “Governments must take on their
responsibilities and not subcontract them out to monetary
policy.”

Aiming squarely at Paul Krugman, he said, “In the US, certain
people believe that the ECB should buy more sovereign debt like
the American Federal Reserve. But we’re not a federal state, and
the Fed doesn’t buy the debt of California or Florida.” And he
vetoed in advance any new Long Term Refinancing Operations (LTRO)
through which the ECB late last year and earlier this year had
lent banks €1 trillion for three years at 1%. “Like morphine,
they relieve the pain but don’t cure the disease," he said. "And
there are side effects, such as delaying the reform of the
banking sector.”

He wasn't the only one who was worried. “My investing model is
ABCD: Anything Bernanke Cannot Destroy: flashlight batteries,
canned beans, bottled water, gold, a cabin in the mountains,”
said David Stockman in a pungent interview. The
director of the Office of Management and Budget under President
Reagan saw a "paralyzed" Fed is in its "final days," hostage of
Wall Street "robots" that trade in markets that are "artificially
medicated." Read the whole interview..... The Emperor is Naked: David Stockman.